Tag Archive | "xle"

Bonus Trade: Energy (XLE) June Iron Condor

Friday, May 2, 2008

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Yesterday seemed to mark some significant sector rotation, and while the overall commodity and energy stories are fundamentally intact, the intense price action may be moderating here, presenting a good opportunity to collect some premium. The Thesis The trend in energy seems to have stalled. We’re seeing confirmation on the technical side as the Average Directional Index on the XLE daily chart turns down.  A falling ADX reading suggests that any existing trend is moderating and that price action…

Indecision is a Decision

Thursday, April 24, 2008

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Some quick thoughts tonight: 1. The VIX dipped below 20 intraday for the second time this year.  The 1-month VIX continues to head lower relative to the 3-month VXV, and the more stretched this ratio gets, the more bearish that reading is for stocks.  The funny thing about volatility readings is that they’ll tend to drift lower, and then spike up suddenly.  We’re due for a jump in the VIX – maybe not now, but soon. 2. Lots of resistance…

Does This Rally Have Legs?

Tuesday, April 22, 2008

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So the big question now is whether the markets are consolidating and setting up for another move higher, or are preparing to roll over from the lack of broad-based leadership. As energy and commodities power higher, the financials continue to act as a major drag – consider the chart at right comparing the S&P500 ETF (white line) with the Dow Jones Industrials ETF (blue line). The Dow has clearly outperformed recently, and without some relief in the financial sector, it’s…

Short Gamma May Exacerbate the Rally

Wednesday, April 16, 2008

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UPDATE: Adam makes basically the same point here. His comment at the end is that this morning’s sustained decline basically sucks the fuel out of any potential gamma fire, which is a good point. Sure, rallies like this are exciting, but on a medium-term view today’s action doesn’t prove much. We’re still within the recent trading ranges on all the major indexes, and although markets have really taken any good news as an excuse to rally and have shrugged…

Bonus Trades: Long Financials, Short Energy

Thursday, April 10, 2008

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These are very short term overbought/oversold technical plays only. Energy (XLE) Thesis: The Energy ETF is well overbought on a short-term basis – practically maxed out at 99.98, and the implied volatility relative to its historical volatility over the past 21 sessions is also giving a sell signal. Trade: Buy buy buy lots of naked puts!  Just kidding.  The XLE April 80/82 call vertical is selling for about $0.60. There are only 8 days left until April expiration if things…

Going Nowhere Fast

Monday, April 7, 2008

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Markets ripped higher pre-open, gave it all back right away, moved higher again, and then gave it all back again through to the close. There: we just saved you six and a half hours, you didn’t miss a thing. Alcoa announced earnings after the close and missed and is down another 15 cents after a -1.50 day. Indexes hit some overhead resistance and volume was really blah today. The VIX, which was down another 3% intraday, closed down just 0.03.…

Implied Volatility is Pricing in a Yawn Tomorrow

Thursday, April 3, 2008

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So yesterday we suggested that everybody keep an eye on their deltas ahead of Friday’s big employment number. Well, if volatility readings today are to be believed, you could probably be trading blind today and tomorrow and not really notice – the index volatility indexes (VIX, VXN, VXD, RVX) opened higher but then sold off for the rest of the day. Maybe everybody got their “employment number” puts at the open. Either way, implied volatility is low just about everywhere,…

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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